Nestle India rises after clarification

The National Anti-profiteering Authority (NAA) has imposed a penalty of Rs 90 crore on Nestle India for not providing the benefits of rate cuts to consumers.

The National Anti-profiteering Authority (NAA) profiteering watchdog under the Goods & Services (GST) regime has also directed Nestle to slash prices 'commensurately' and authorised that the Director General Anti-Profiteering (DGAP) issues a showcause notice asking reasons why the fine should not be imposed.

Nestle India clarified that it took appropriate measures to pass on commensurate benefits of GST to its consumers. The FMCG major said it will consider appropriate actions post studying the NAA order.

The company said the benefits largely have been passed on by way of reduction of Maximum Retail Price (MRP) or by way of increase in grammage. Further, on stock keeping units (SKUs) where it was not practicable to pass on the benefits, say for example NESCAFE single serve packs for Rs 2 or MAGGI Noodles Rs 5 packs, the benefit has been passed on other pack sizes within the same product category.

In some situations where the benefit could not be passed on instantly by reduction in MRP or increase in grammage, the amount was set aside, to be subsequently passed on and was not reckoned either in our sales or profits. At the company's request, the authority through its communication had advised to provisionally deposit the amount computed by us amounting to around Rs 16.5 crore in the Consumer Welfare Fund, which had been done by the firm suo moto.

Nestle is studying the order passed by the NAA and will consider appropriate action as advised. The announcement was made before market hours today, 12 December 2019.

Shares of Nestle India was up 0.26% to Rs 14,105.

Meanwhile, the S&P BSE Sensex was up 108 points or 0.27% to 40,520.54.

On the technical front, the stock's RSI (relative strength index) stood at 43.624. The RSI oscillates between zero and 100. Traditionally the RSI is considered overbought when above 70 and oversold when below 30.

The stock was currently trading below its 50-day moving average (DMA) placed at Rs 14,353.38, but still above its 200 DMA placed at Rs 12,150.23.

Nestle India's net profit jumped 33.5 % to Rs 595.41 crore on 9.5% rise in net sales to Rs 3,199.31 crore in Q3 September 2019 over Q3 September 2018.

Nestle India operates in the food segment. The company's food business incorporates product groups, which include milk products and nutrition, beverages, prepared dishes and cooking aids, and chocolate and confectionery.

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